Real Estate News, Reviews and Investment
Article: Prices for houses are reasonable in California and rental demand exists.
California has performed best when it comes to the recovery in housing prices and has recorded double-digit growth year on year for 8 months consecutively. 6 of the top 7 cities, which saw prices grow by 20% in February over the same month of the previous year, are in California.
While this might seem as if we looking at another bubble, there is nothing to be worried about (despite the bidding wars and the steep increase in prices).
Moreover, there are good reasons for the sharp spike in prices.
The residential property market in California
Experience suggests that recoveries in the housing market are driven by increased demand from people looking for a place to live. But this time, investors seem to be leading the charge.
This is worth noting because the housing bubble has been attributed to excessive speculation.
The predominance of investors suggests that this is the beginning of the rental boom and home ownership has declined to around 65% from 69% in 2005.
Because investors have a stake in maintaining their investment properties properly, they also have an impact on neighborhoods that have been negatively impacted by falling prices and foreclosures.
The rental market has long been the preserve of small investors and retirees but, increasingly, large companies are entering the market.
The bottom line
Investment in rental property in California seems like a good idea when you consider that returns on investment, by way of rental income, are superior to other forms of investment in the current low-interest-rate regime.
However, you should ensure that you do not overpay and that rental demand exists.